Partic age 75 takes full distribution before termination. RMD still?

I think I know the answer, but:

Participant is age 75, non-owner, still working.  She decides to take a full in-service distribution and rolls it to her IRA.

In June, she retires.

Does she have to remove what should have been her plan-related RMD from the IRA?

Yes has always been my understanding.  

The RBD is 4/1/2020 but the first distribution calendar year is 2019, so agree with EG.

Not quite clear from the OP, did the in-service distribution and the retirement both occur in the same year?

8 minutes ago, david rigby said:

Not quite clear from the OP, did the in-service distribution and the retirement both occur in the same year?

Yes.  Particiapant wants full distribution now and will probably retire in June.

The in-service withdrawal was not subject to a RMD since she was still working at the time of withdrawal.  Now that the money is in the IRA, the IRA RMD rules apply to the money.  She will need to take an RMD by 12/31 from the collective total of all her IRAs but will be able to choose which IRA she uses to make the payment. 

3 minutes ago, EHE said:

The in-service withdrawal was not subject to a RMD since she was still working at the time of withdrawal.  Now that the money is in the IRA, the IRA RMD rules apply to the money.  She will need to take an RMD by 12/31 from the collective total of all her IRAs but will be able to choose which IRA she uses to make the payment. 

I strongly disagree with this view.  I see no way to reconcile this with the IRS rules and regulations.  

In fact the math/logic doesn't work.  Since the IRA RMDs that need to be taken by 12/31/2019 are based on the balances in the IRA on 12/31/2018.  This money wasn't in the IRAs on 12/31/2018 so this money wouldn't have an RMD amount taken for it.  So there would be no RMD taken on the money from the 4k plan in 2019 if the IRA RMDs are done correctly and you don't take the RMD from the 4k plan.  

Not trying to be harsh here but don't see how this can be done.  

totally agree on the IRA RMD situation.  I'm going to blame it on the fact that it's late on a Friday afternoon.  but you do agree that no RMD was required for the ISW and that no money needs to be withdrawn from the IRA in 2019, right? 

Disagree. If she retires in 2019 she has an RMD from the Plan for 2019 which is supposed to be the first monies taken from the Plan and that RMD piece is not eligible for rollover. My understanding is that the Plan should issue one 1099-R for the RMD and one for the balance of the Rollover with instructions to the participant to remove the RMD piece from the IRA as an excess IRA contribution that was not eligible for rollover.

But as you say it is late on a Friday so my explanation may or not make logical sense.

Late on Friday or not, the correct answer is always logical. The timing of the withdrawal and retirement during the year is irrelevant.

On 5/3/2019 at 3:28 PM, EHE said:

totally agree on the IRA RMD situation.  I'm going to blame it on the fact that it's late on a Friday afternoon.  but you do agree that no RMD was required for the ISW and that no money needs to be withdrawn from the IRA in 2019, right? 

 

I stand with the others.  There needs to be some kind of correction to fix the fact there needs to be an RMD for 2019.  As others pointed out the regulations are very clear on this the 1st dollars from the plan in the year a person 70.5 terminate is the RMD payment. 

Read Q7 of these regulations.

https://www.law.cornell.edu/cfr/text/26/1.402(c)-2

Everyone I know agrees these rules require the 1st dollars leaving the plan are the RMD in the year a person terminates and is over 70.5.  It doesn't matter that at the time of the payment the person was working  Once the person terminates and it happens in a year a payment has already happened the first dollars paid change to the RMD and the person needs to fix the fact they are in their IRA.  

So money needs to come out of the IRA to account for the fact they are RMD dollars that can't be  rolled into an IRA that are now in the IRA.

21 hours ago, ESOP Guy said:

I stand with the others.  There needs to be some kind of correction to fix the fact there needs to be an RMD for 2019.  As others pointed out the regulations are very clear on this the 1st dollars from the plan in the year a person 70.5 terminate is the RMD payment. 

Read Q7 of these regulations.

https://www.law.cornell.edu/cfr/text/26/1.402(c)-2

Everyone I know agrees these rules require the 1st dollars leaving the plan are the RMD in the year a person terminates and is over 70.5.  It doesn't matter that at the time of the payment the person was working  Once the person terminates and it happens in a year a payment has already happened the first dollars paid change to the RMD and the person needs to fix the fact they are in their IRA.  

So money needs to come out of the IRA to account for the fact they are RMD dollars that can't be  rolled into an IRA that are now in the IRA.

 

Agree. The RMD is now an excess contribution in the IRA, and needs to be corrected under the excess contribution rules ( by tax filing due date, plus extensions- and  Include net income attributable, in order to avoid the 6 percent excise tax. ),